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May 26, 2009 at 2:00 AM

It's working. The state's effort to open up the automobile insurance market to competition was an instant success, last year, and is building momentum.

It's working.

The state's effort to open up the automobile insurance market to competition was an instant success, last year, and is building momentum. The newest entry is Allstate, the country's second largest auto insurer, which has filed an application and rate proposal and could be doing business by November.

Allstate is returning after a 20-year absence. It was among 35 companies that fled the state after the insurance commission began setting rates in the late 1980s. The company whose spokesman is a wry lizard with a Cockney accent — Geico — just set up shop on May 18. Progressive moved in and is salting the airwaves with ads that show savings racking up like a jackpot spin on a slot machine. Eleven companies are doing business in the state that weren't here at the start of 2008.

The old rate-setting scheme was well intentioned. It was designed to make sure urban residents could, first of all, get coverage, and at reasonable rates. It did that by equalizing urban-rural rates to some extent and forcing companies to share the risk of risky drivers.

It turned out to be a double-edged sword, as social subsidies often are. With only 19 companies operating here — and a couple of them dominating the market — Massachusetts drivers paid more than all but five other states.

Not all the protections were thrown out in the "managed competition" model that originated in the Romney administration and was shepherded to reality by Gov. Deval Patrick's insurance commissioner, Nonnie Burnes. Companies still can't deny coverage for socio-economic reasons — gender, race, creed, national origin, marital status, religion, age, occupation, income, principal place of garaging your car, education or whether you rent or own your home. Or based on your credit rating.

And the proposed rate structure has to be reviewed and approved by the commissioner.

Companies can still base premiums on risk — expect to pay more if you're young and live in the city, less if you're well-seasoned and live in Eastham. And you will certainly be charged more if you have a record of accidents or violations.

Massachusetts remains a high-cost state, in part because of traffic volume, theft and uninsured motorists. But companies are more free now to tailor their offerings to high- and low-risk groups — to work to their own strengths — and compete for preferred customers.

It's a great example of how prudent deregulation can help the consumer and maintain the network of coverage that protects us all.

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